Yesterday the European Securities and Markets Authority (ESMA) published two long reports on the DLT Pilot Regime. Both explore how market infrastructures should comply with regulatory reporting. One paper looks at what regulatory data can be gathered from each type of distributed ledger. The other explores the format to provide the data to the regulator.
As context, the DLT Pilot Regime commenced in March 2023. It allows financial market infrastructures (FMIs) to use blockchains – permissioned or permissionless – for the issuance and trading of tokenized stocks, bonds and funds, including money market funds. The law permits limited exceptions from current regulations. These include allowing the same market infrastructure to combine trading and post trade. And retail investors can transact directly with an exchange.
However, large institutions criticized the small limits on transaction volumes. Hence, it’s more likely to attract startups. However, all participants have to be regulated institutions. So far, only a couple of projects have publicly announced their participation.
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